Concerns over Note Printing Australia in 2004

A senior executive at the Reserve Bank of Australia offshoot involved in bribery allegations raised serious concerns with then RBA assistant governor
Frank Campbell
in mid-2004, three years before the central bank took action.

The warnings from former Note Printing Australia company secretary Kevin Leslie McDonnell came after he had repeatedly told other NPA executives and its board of “ongoing serious deficiencies" at the RBA subsidiary in late 2003 and 2004.

However the failure of NPA executives to address the “culture and compliance issues" ultimately led the company secretary to quit in frustration and then warn Mr Campbell.

Eight former executives at RBA subsidiaries NPA and Securency are facing criminal charges of bribery and inappropriate payments.

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Mr McDonnell’s warning came more than three years before his successor, Brian Hood, met the then RBA deputy governor
Ric Battellino
with his concerns in 2007 which led to foreign agents being dropped at NPA.

“The RBA audits had continued to identify numerous ongoing serious deficiencies with [NPA] that in my opinion needed to be immediately addressed," Mr McDonnell said in a witness statement tendered in court yesterday. “In early to mid December 2003, after my increasing concerns regarding the fore mentioned internal control and security issues (that had been recognised in the internal RBA audit process) and the lack of response I received from [then CEO John] Leckenby to my raised concerns, I decided that I would resign", he said.

When Mr McDonnell confronted NPA chairman and former RBA Deputy Governor Graeme Thompson in February 2004 he was told his “concerns were noted".

Mr McDonnell said he also raised his concerns about “internal control weaknesses" with RBA Assistant Governor Frank Campbell, at a lunch in Sydney in mid-2004, who was subsequently appointed to the NPA board.

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The RBA declined to comment yesterday but sources familiar with the conversation said it primarily focused on Mr McDonnell’s concerns with operational matters at NPA.

Mr McDonnell said he first raised concerns with matters flagged in the RBA audits with the board of NPA including Graeme Thompson, Les Austin, Mark Bethwaite and Dick Warburton at a board meeting on December 18, 2003.

At a subsequent NPA board meeting the directors were told the companies trading loss for the half year ending December 2003 was in excess of $4 million – “the worst presented to the board" who “questioned whether [NPA] was a viable business".

However, the company was kept afloat by a 2003 Christmas Eve deal signed with the Malaysian central bank for 160 million Ringgit banknotes. Mr McDonnell said he was being pressured by Securency executives to put the Malaysian deal through the accounts before the contract was signed but refused because it was “inappropriate and not transparent".

Mr McDonnell was forwarded a Debit Note days later for a $50,000 commission payment to NPA’s Malaysian agent Abdul Kaym with a handwritten note to “please make the payment urgently". The companies former accountant processed another payment to Mr Kayum for almost $300,000.

Mr McDonnell was later contracted during 2004 to review the companies foreign agent arrangements. In his review, Mr McDonnell uncovered letters from Mr Leckenby to the companies Maylasian agent Abdul Kaym in 2003 and 2004 confirming “excessive" commission rates of 17 and 20 per cent.